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Tax reform requires priorities to maximize
impact
Draws upon…
◦ “The Final Report of the Tax Policy Review
Committee to the Government of Jamaica” (2005)
◦ “Tax Reform and Economic Development: The
Jamaican Case” (2007) by Bahl and Wallace
◦ “A Blueprint for Taxation Reform in Jamaica” (2009)
by the National Planning Summit Tax Reform
Committee
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If sufficient revenue is not being generated,
two central questions must be asked:
◦ Is government spending excessive or wasteful?
◦ Is the particular design of the tax system impeding
its ability to generate revenue?
 Revenue
 Efficiency
 Fairness
 Integrity
 Growth
The NUMBER ONE objective
should be to stimulate
economic activity in order to
achieve economic growth and
prosperity
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Next to crime and theft, inefficient
government bureaucracy ranked most
problematic factor for doing business
Jamaica ranked in bottom ten of 183
countries assessed for ease of tax
compliance.
Most detrimental aspect was required number
of tax payments per year.
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Extend the period of validity of the Tax
Compliance Certificate
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Design and implement a Unified Tax Return
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Permit GCT groups
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Permit bi-monthly filing for small taxpayers
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Lower cost to businesses for compliance.
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Increased compliance.
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Improved fairness
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Lower tax administrative costs
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Less distraction from core business activities
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Higher levels efficiency in the tax system
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Higher levels of economic growth
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Revenue stability
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Simpler/Less costly Administration
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Increased compliance
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Since GoJ’s position is weaker than most of
its regional counterparts, it is likely that:
◦ Either the tax rate would need to be higher than the
regional average.
◦ Or, the tax base would need to be wider than the
regional average.
◦ Or, both.
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If the social safety net is not otherwise
adequate, an argument may be presented in
favour of maintaining a higher than average
VAT rate on a restricted base
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Restricting the indirect tax base shields the
rich.
Focusing on the direct spending approach
rather than restricting the tax base would
result in net revenue savings to the
government.
More social protection can be afforded by
using the direct spending approach.
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Reduce the CIT rate
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Raise the personal income tax threshold
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Eliminate zero-ratings on supplies to
government
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Tax expenditures are concessions designed
to provide a benefit for either a specific
activity or class of taxpayers.
In Jamaica, concessions relating to GCT and
tax incentives are the largest amounting to
about 6% and 4% of GDP, respectively.
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Defended based on the assumption that they
provide stimulus for economic activity,
The revenue losses necessitate elevated
overall tax rates.
They provide a disincentive for the rest of the
economy.
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Compromises fairness and integrity.
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Encourages a culture of non-compliance.
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Eliminate discretionary waivers
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Present a tax expenditure budget
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Improved fairness and integrity.
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Increased compliance.
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Revenue increase of more than 2% of GDP
from eliminating discretionary waivers.
Potential gain of an additional 1.9% of GDP
from eliminating other tax incentives.
Stimulating growth
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The three priorities for tax reform in Jamaica
should be to:
1. Simplify the System of Compliance
2. Decrease reliance on Direct Taxes
3. Eliminate the Inefficient and Ineffective use of Tax
Expenditures/Concessions (FIRST PRIORITY!)
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The Green Paper prioritizes 1 and 2
The specific actions recommended would
improve all five criteria for determining the
efficacy of the tax system (efficiency, fairness,
integrity, growth effects and revenue generation)
but, most importantly, encourage economic
growth.